PSX proposes tax measures, incentives

KARACHI: Pakistan Stock Exchange (PSX) on Thursday urged the government to rationalise taxes on securities and introduce incentives for investors, which will help in spurring economic growth. 

Chairman Munir Kamal at PSX called for rationalisation of bonus, capital gains and capital value taxes and withdrawal of taxes on real estate investment trust schemes.

“PSX represents taxpayers who are fully documented and contributing more than Rs670 billion to national exchequer – 20 percent plus of the Federal Board of Revenue’s collection,” Kamal said, talking to journalists.

The PSX’s management proposed that the tax on issue of bonus shares should be removed since it has no significant impact. “It is only an accounting entry and has discouraged companies from issuing bonus shares since its introduction,” the proposal said.

The management also proposed rationalisation of capital gains tax (CGT). At the time of introduction of this tax, the government said the CGT rate would be determined after mutual agreement. “However, it is currently not the case,” it said. Government also agreed to abolish the capital value tax.

The PSX management said a tax rebate of 20 percent for one year on the listing of new companies was also introduced during the last budget. “This rebate should be extended for the five years to encourage more companies to list on the bourse,” it added.

The PSX further proposed the government to reintroduce the last year’s incentives on real estate investment trust schemes. The incentives were withdrawn shortly after its launch.

Kamal said the government remained the biggest beneficiary of the stock market’s performance. The market earned the government Rs453 billion and Rs170 billion through privatisation deals in the last two years.

The government also received Rs14 billion in investment profits from the National Investment Trust in the fiscal year of 2013/14.

Chairman Arif Habib at Arif Habib Group chimed in to say. “Taxation policy should be for medium- to long-term,” Habib said.

He said the government should introduce tax measures and incentives to boost market capitalisation. 

He said as the government shifted its emphasise towards growth, the capital market should also be ready to respond positively.

The stocks dealer said the capital market requires some tax measures to help the government achieve rapid GDP growth.

He said keeping in view the importance of the capital market as a revenue generator, the PSX presented a number of proposals to the government, “which if accepted will further bolster the market’s performance and will not impact the government’s revenue collection.”

“It would help in achieving higher value of listed shares comparable to regional countries with possible increase of Rs1.8 trillion in the market capitalisation, resulting in increase in value of government’s shareholding in listed companies by Rs340 billion,” he added. 

The government holds 20 percent of the total shareholdings.

Habib said the package, if approved in the budget, would help in raising equities of approximately Rs250 billion for privatisation, China-Pakistan Economic Corridor projects and industrial expansions.

“This will also help in rapid growth of GDP by making available necessary financial resources for investments in the economy and providing job opportunities and higher revenues with lower tax rates for the government as the size of economy increases,” he added.